Karachi, May 24, 2023 (PPI-OT): Pakistan Cement - Cement sector benefits from declining coal prices

International coal prices have plummeted recently, touching the lowest level since Jun’21, with Richards Bay coal price currently hovering at US$103/ton vs. US$142 per ton CYTD, down 28%.

Afghan coal prices have dropped to PkR50k/ton, down ~7-10% from average of PkR54-56k/ton in the outgoing quarter.

Cement players in the North mostly rely on local and Afghan coal, so decline in the Afghan coal prices would positively impact their bottom lines. While, declining international coal prices would improve gross margins of Southern players.

Overall, from the AKD cement universe, our top picks remain LUCK, MLCF, and FCCL with Dec’23 TP of PkR651.0/38.4/16.5 per share, offering upside potential of 39%/42%/40%, respectively.